How do you actually make money with Rental properties?!

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How do you actually make money with Rental properties?!

Jesse Flores
San Antonio, TX · Member since 2017 · 3 posts · 0 votes

So, I'm not looking to get rich, or anything crazy, I just want to make a comfortable living, make passive income off of real state rental properties,  I know it will take a long time and patience. I'm not looking to own a ton of properties neither. 

Here is the question, might be super basic though sorry, I looked around and couldn't find an answer.  

HOW do you make actually money off of rental properties? Say you are starting out... you buy an apartment for $25k, plus monthly maintenance. You rent it out for about $450/month, and like, your actual monthly returns are...  like... say $250 right, so how does this make money? It would take like 20 years for the unit to pay itself off and start making you some cash flow.  No? so what I'm trying to understand here is...

Whats the basic concept of making money this way? I would like to make $5000/ month on passive income with rental properties, but I would like to see that return in no more than 5-10 years, how do you actually do this? 

Thank you all for reading, any future wisdom provided, much appreciated.

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Bryan Hancock
Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
9y

4 ways:

1.  Cash flow

2.  Principal repayment through loan amortization

3.  Appreciation

4.  Tax shelter of income

I really haven't ever met a real estate investor that regretted buying too many properties.  If you're patient items 1-4 above will slowly make you rich.  The cumulative effect of owning property adds up over time.  The property works for you 24 X 7; 365.

If you couple this with a discount purchase and/or force some appreciation through improvements you can couple these strategies with owning property long-term.  I have developed 54 projects over the last 6 years that have made millions for we and our investors.  That money is all rocket fuel that can be used to buy more property and get the projects working for us day in and day out.  

I would suggest you start with a copy of @Frank Gallinelli's book you can purchase on Amazon:

What Every Real Estate Investor Needs to Know About Cash Flow... And 36 Other Key Financial Measures

Investing some time on The Mortgage Professor's site:

Mortgage Professor

will also teach you about loan types for residential properties.  Ray Alcorn's Dealmaker's Guide To Commercial Real Estate is the best book I have found for commercial properties if you head in that direction.  

Start small, learn the game, and get those properties working to make you wealthy.  My only regret over the last 15 years of investing is not purchasing more buy-and-hold properties.  

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  • Account Closed
    Investor · Scottsdale, AZ · Member since 2016 · 1k+ posts · 885 votes
    9y

    Hi Jesse. We have an Austin office so I'm familiar with the San Antonio market. First off, there are far easier ways to get to where you are wanting to go. But, to answer your question, you have to take in an 20% vacancy rate, a new roof every 15 to 20 years, a trashed house you have to rehab at least once in the 20 years, a new furnace/AC at least once and changing tax laws and neighborhood profiles. (Not to mention the toilets you have to unclog and the water heaters you have to have replaced while on vacation.) Now, how do you think I know this. It has all happened to me. ;-) My profile explains what I do now, instead and much more profitably.

    It can work, but it IS work. So, using a spread sheet, you have to buy cheaply, be very scrupulous in who you rent to and watch it like a hawk. That is your retirement you are caring for.

    3Reply
  • Abdul Azeez
    Real Estate Investor · Monroe Township, NJ · Member since 2016 · 468 posts · 85 votes
    9y
    Originally posted by @Jesse Flores:

    So, I'm not looking to get rich, or anything crazy, I just want to make a comfortable living, make passive income off of real state rental properties,  I know it will take a long time and patience. I'm not looking to own a ton of properties neither. 

    Here is the question, might be super basic though sorry, I looked around and couldn't find an answer.  

    HOW do you make actually money off of rental properties? Say you are starting out... you buy an apartment for $25k, plus monthly maintenance. You rent it out for about $450/month, and like, your actual monthly returns are...  like... say $250 right, so how does this make money? It would take like 20 years for the unit to pay itself off and start making you some cash flow.  No? so what I'm trying to understand here is...

    Whats the basic concept of making money this way? I would like to make $5000/ month on passive income with rental properties, but I would like to see that return in no more than 5-10 years, how do you actually do this? 

    Thank you all for reading, any future wisdom provided, much appreciated.

     It may not be worth it given the number of properties and headache you need to deal with to meet your return objective. Sticking to more fully vetted investment models like stocks or mutual funds may be better use of time and energy.

    0Reply
  • Joseph Hennis
    Fairfield, CA · Member since 2017 · 98 posts · 84 votes
    9y

    lol such weird advice. One guy mentions go with wholesaling, the other stocks and mutual funds. Really?

    Neither of those create better passive income. Wholesaling is not passive. Period. Stocks and mutual funds don't often kick out big dividends (dividends are cash flow!).

    So, to answer your question... Well first, my own question... An apartment for 25k? and it's only 1 unit? What kind of apartment building has only 1 unit? Do you mean a condo?

    I'm going to assume you mean a single family home rental. In which case, $250ish a month is about right. You would need 20 properties to make $5000/month. But wait, all those headaches dealing with tenants, how can it be passive? It can be passive income, if you get a property manager.

    There is a lot of math involved to figure out what price you need to buy at, how much loan you should get, what will be your cash on cash returns, your overall returns, etc. I can walk you through some deal analysis. To get an idea of what kind of returns you can make, use the bigger pockets calculator or the one here.

    https://financialmentor.com/calculator/real-estate-calculator

    4Reply
  • Ellis San Jose
    Specialist · Westlake Village, CA · Member since 2010 · 1k+ posts · 781 votes
    9y

    If you learn to find or create opportunities that have positive cash flow & buy below market or create value.  Your income will increase with each positive income producing asset you acquire or control.

    If you have 10 assets with a current positive cash flow of $300 per month each & over time the debt is paid down & the net income increases to $500 per asset or more, you will have reached your monthly income goal.

    Yes you will have repairs & capital improvements, that's why it is so critical to buy correctly & make sure the properties support themselves.  Just don't count heavily on appreciation as the foundation of your projections.

    3Reply
  • David Faulkner
    Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
    9y

    You are wiser than you probably realize by spotting early on that a few hundred bucks a month in cashflow is not going to make you rich ... so many newbies dream of stacking up 50 units at $200/mo cashflow and think that that is how they will strike it rich ... even if that works, sounds like an incredible PIA to me. You are MUCH better off getting 10 units that have total returns of $1000/mo ... quality over quantity. You can do this by understanding and exploiting ALL the profit centers in REI. You already mentioned cash flow, and the only thing I'd add is that if you buy in a highly desirable area, then your cash flow on day one may be low, but with consistent rent increases over time could end up high ... this is VS buying in the ghetto with high cash flow on day one, but those rents rarely go up to even keep up with inflation so your cash flow diminishes over time.

    Then there is appreciation. There is forced appreciation (the way flippers make money, but buy& hold investors can too) and market appreciation. Both are good, you want to try to get both if you can.

    Then there is ammortization, or mortgage pay down ... if your tenants are paying your mortgage for you and it is not an interest only loan, that means that every month part of that mortgage payment goes towards principal pay down ... the amount owed gets smaller and smaller until one day (if you don't cash out refinance) you own the property free and clear.

    Figure out how to analyze and manage all of these ... books can and have been written on it, but that should point you in the right direction. IMO the analytical framework for bringing all of these elements together to calculate your returns is IRR (can google it) ... running some scenarios through IRR calculations will help you see how things can pan out in the long haul. Anyway you slice it, though, Real Estate is a get rich slow but steady type gig, and it's not easy or for everyone, but it does work for those willing and able to work it. Good luck.

    4Reply
  • Bryan Hancock
    Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
    9y

    4 ways:

    1.  Cash flow

    2.  Principal repayment through loan amortization

    3.  Appreciation

    4.  Tax shelter of income

    I really haven't ever met a real estate investor that regretted buying too many properties.  If you're patient items 1-4 above will slowly make you rich.  The cumulative effect of owning property adds up over time.  The property works for you 24 X 7; 365.

    If you couple this with a discount purchase and/or force some appreciation through improvements you can couple these strategies with owning property long-term.  I have developed 54 projects over the last 6 years that have made millions for we and our investors.  That money is all rocket fuel that can be used to buy more property and get the projects working for us day in and day out.  

    I would suggest you start with a copy of @Frank Gallinelli's book you can purchase on Amazon:

    What Every Real Estate Investor Needs to Know About Cash Flow... And 36 Other Key Financial Measures

    Investing some time on The Mortgage Professor's site:

    Mortgage Professor

    will also teach you about loan types for residential properties.  Ray Alcorn's Dealmaker's Guide To Commercial Real Estate is the best book I have found for commercial properties if you head in that direction.  

    Start small, learn the game, and get those properties working to make you wealthy.  My only regret over the last 15 years of investing is not purchasing more buy-and-hold properties.  

    7Reply
  • Adam Acord
    San Antonio, TX · Member since 2014 · 38 posts · 29 votes
    9y

    @Bryan Hancock, Thank you for pointing out the biggest reason the majority of my clients are investors: appreciation.  So many new investors contact me wanting the cash flow, but end up disappointed when they really start digging into the properties and the numbers.  Real estate investing is a long game for the majority of my clients.  

    Also to your point of not purchasing more buy & hold, I have a client who's been with us for 20 years.  All of his houses (5) are paid for and he takes good care of them, so the maintenance isn't bad.  His distributions are >$6,500/month.  That's fantastic cash flow.

    3Reply
  • David Faulkner
    Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
    9y
    Originally posted by @Bryan Hancock:

    4 ways:

    1.  Cash flow

    2.  Principal repayment through loan amortization

    3.  Appreciation

    4.  Tax shelter of income

    I really haven't ever met a real estate investor that regretted buying too many properties.  If you're patient items 1-4 above will slowly make you rich.  The cumulative effect of owning property adds up over time.  The property works for you 24 X 7; 365.

    If you couple this with a discount purchase and/or force some appreciation through improvements you can couple these strategies with owning property long-term.  I have developed 54 projects over the last 6 years that have made millions for we and our investors.  That money is all rocket fuel that can be used to buy more property and get the projects working for us day in and day out.  

    I would suggest you start with a copy of @Frank Gallinelli's book you can purchase on Amazon:

    What Every Real Estate Investor Needs to Know About Cash Flow... And 36 Other Key Financial Measures

    Investing some time on The Mortgage Professor's site:

    Mortgage Professor

    will also teach you about loan types for residential properties.  Ray Alcorn's Dealmaker's Guide To Commercial Real Estate is the best book I have found for commercial properties if you head in that direction.  

    Start small, learn the game, and get those properties working to make you wealthy.  My only regret over the last 15 years of investing is not purchasing more buy-and-hold properties.  

     Doh! I forgot to mention about 4.Tax shelter of income, and it is a really good one ... thanks for adding Bryan! I strongly agree with everything said except that I have met investors that have regretted buying and holding too many of the wrong type of properties (for them and their goals).

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    @Account Closed  sub too has its place.. and in most markets not happening these days no reason for sellers to do this.. they can cash out.

    its a HORRIBLE idea for newbies and those that have little to no money.. they can find themselves in a world of hurt when their buyer default or the renter does what has happened to you and they need to continue making payments and simply don't have the dough to fix them up nor make the payments

    you leave the seller in an extremely bad place.. they then sue and turn folks in to the authorities  ( like you ask me how I know :)  I have rescued more than one novice thinking sub too was nirvana only to find them selves totally fubared.

    its only good for very short term and for those with money... no begineers with little capital..

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    3Reply
  • Jesse Flores
    OP
    San Antonio, TX · Member since 2017 · 3 posts · 0 votes
    9y

    Wow, I hear what you all are saying but, it all sounds like you are trying to drag it, into other realms. Too complicated. I live in Japan, so, I'd be trying to do this stuff here. Not in the states. I know, different market but, like, ok lets say 5000 would be too complicated, how about $2000? like, I really dont want to have to deal with a ton of properties, like a lot of you say, it sounds like a pain in the ***, for such little return, I might as well look somewhere else. 

    But I'm still curious, people who own rental places, do they wait like 10-20 years before they can start to see those 250$ cash flow per month ? Like that sounds crazy to me. Cause how do you pay the property off otherwise? regardless of it being your own cash or loan, you have to pay that off somehow, the money it takes u to do that... and the returns you get.. like at what point does this becomes any kind of worth it? 

    0Reply
  • Jesse Flores
    OP
    San Antonio, TX · Member since 2017 · 3 posts · 0 votes
    9y

    Wow, I hear what you all are saying but, it all sounds like you are trying to drag it, into other realms. Too complicated. I live in Japan, so, I'd be trying to do this stuff here. Not in the states. I know, different market but, like, ok lets say 5000 would be too complicated, how about $2000? like, I really dont want to have to deal with a ton of properties, like a lot of you say, it sounds like a pain in the ***, for such little return, I might as well look somewhere else. 

    But I'm still curious, people who own rental places, do they wait like 10-20 years before they can start to see those 250$ cash flow per month ? Like that sounds crazy to me. Cause how do you pay the property off otherwise? regardless of it being your own cash or loan, you have to pay that off somehow, the money it takes u to do that... and the low returns it yields, like, at what point does this become any kind of worth it? 

    0Reply
  • Natalie KolodijBusiness Member
    Moderator
    Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
    9y

    You're mixing up cash flow with free and clear cash flow 

    You buy your rental to be making $250 a month cash flow from day 1- after paying the cost of your mortgage/repairs/ect. 

    Once the mortgage is paid off in 15/30 years your $250 cash flow should be quite a bit higher between raising rental rates and no longer having the biggest expense deducted from your gross income (mortgage)

    Even if you have a mortgage on the property, but after paying that (and all other bills) you still have money left over, that's cash flowing. 

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  • David Dachtera
    Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    9y

    @Jesse Flores,

    The short answer to your question is only two words: "Property Analysis".

    The longer answer is to get educated on how to analyze properties and determine a suitable strategy for any given property. If that strategy turns out to be buy-and-hold, work up the numbers and see how the deal has to work to be profitable.

    The longest answer - and yet the shortest - is, again, only two words, and you've already seen them in the previous paragraph: "get educated".

    0Reply
  • Chris Masons
    Investor · Union, NJ · Member since 2011 · 838 posts · 295 votes
    9y

    Jesse,

    there is an old saying that goes like this.. You make money in Real Estate when you BUY not sell. IOW, buying at the right or wrong price makes all the difference... Generally speaking it is difficult to make money paying retail as the return usually isn't there... (if it was a lot more people would be doing it, right?) You need to find a DEAL.. Sometimes this is easy but most times this is difficult and not readily out there jumping out at you saying BUY ME, BUY ME!!!

    Once you buy right (toughest part - the acquisition) than you work on making things work in your favor IE. manage very carefully, have a network of people to turn to who will not rip you off assuming you won't be doing the management yourself.

    IF you can fully manage and do repairs yourself than that is even better as you won't need to give up this portion of expenses which will in turn boost your return so you are a step ahead.

    Watch your property very carefully, and be even MORE careful about who you rent to. 

    Just randomly buying a property and hoping to make a nice return is definitely not the correct way to go about this...

    hope this helps,

    Chris

    1Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    9y

    I think you are missing leverage.  Buying for cash free and clear would take a looong time to see returns.  A cap of 6 would take over 15 years.

    I did your example in 2003, but it was x10. I bought a 10-unit for $250k with $25k down. Bank REO. He wanted $50k down (most all commercial is 20% down at least) so he took a 3rd mortgage on a house I had 3 states away in CO.

    Anyway, if you use intelligent leverage (borrow at good rates and terms) you will see there is cash-flow.  The other advantages like appreciation, principle pay-off and tax benefits will come into play over time.

    @Jesse Flores - answer me this.  If a person you trusted offered you $100 today or $500 in 5 years, which would you choose?  Leave out risk of non-payment.  That will tell us a lot of what kind of investor you are.  

    A $100 now guy needs to  be an operator - a wholesaler or flipper.  One who waits would be an investor.  Cheers!

    0Reply
  • James Free
    Rental Property Investor · Fort Collins, CO · Member since 2015 · 158 posts · 327 votes
    9y

    @Jesse Flores what you posed in your original question is indeed a terrible way to make money. Read here: https://www.biggerpockets.com/renewsblog/2015/09/0....

    You need to buy a place with better numbers. Put $25k down on a $100k property that rents for $1100/month, and you're more likely to cash flow.

    0Reply
  • Isiah Ferguson
    Investor · Charlotte, NC · Member since 2017 · 321 posts · 157 votes
    9y

    @Natalie Kolodij I'm a newbie as well. Wouldn't you prefer free and clear cash flow over cash flow ? Wouldn't it be more of a cash flow because of less expenses ?

    0Reply
  • Account Closed
    Real Estate Investor · Marysville, OH · Member since 2014 · 242 posts · 196 votes
    9y

    Like most investing, its numbers, and time.  Time is almost always the most important thing.

    I buy a SFH in Parma, OH today. I get it for 65K. I put 20% down and 5K in repairs into it. I'm in it for 20-25K of my money. Every month I make a couple hundred bucks after all expenses and mortgages. However, the value of the home goes up over the long term. The rents on the home go up over the long term. The principal on the loan goes down over the long term - AND someone else is paying it down for me. There are a ton of tax advantages for real estate that I mostly don't understand (its why I have a CPA) but basically I won't be paying taxes on a lot of the income due to depreciation and so on.

    I hire out the management of the day to day. I find the deals, and am involved in terms of acquiring and getting it ready to rent, then I hand it off and think about it once a month when I get my statement. Sometimes there's a little communication happening if some repair occurred or if a tree limb fell on the house (like just happened at one of them:) But for the most part, I don't have to do a whole lot, and in 10 (aggressive) to 30 (autopilot) years, I will have an asset worth 100K (or more) that is free and clear, bringing in a LOT more money every month, etc... All with 20K (or whatever) of my own money. I think that's where the power of REI is. If you have a plan and can work it, you will wake up one day and own a ton of awesome assets.

    I'm not counting on using any of the proceeds of the REI for quite a while. Its all going back into the rental checking account to pay for expenses on the rentals, repairs, acquisition of more rentals, etc... At some point in the next couple years, I will probably do a little bit of "debt snowball" to direct some of the profits into principal paydown to accelerate getting to the free & clear stage on some of them.

    0Reply
  • Joseph Hennis
    Fairfield, CA · Member since 2017 · 98 posts · 84 votes
    9y

    @Jesse Flores I wouldn't plan on keeping them for 10-20 years. Remember monopoly, buy 4 green houses, trade them in for a red hotel? That's a good strategy in RE too. If you buy 10 houses cash flowing at $250 a month (cash flow is after you pay mortgage and all expenses), you are making $2500/mo. Let's say you started with $10k down payments on each of the 10 properties. Now, 5 years later they are worth $40k more each, on average. That's $500,000+ in equity that is only making you $2500/mo in cash flow. Sell them all and use that money to buy a 20 unit apartment complex or a few four plexes. Your cash flow will increase.

    2Reply
  • Account Closed
    Investor · Scottsdale, AZ · Member since 2016 · 1k+ posts · 885 votes
    9y
    Originally posted by @Jay Hinrichs:

    @Account Closed  sub too has its place.. and in most markets not happening these days no reason for sellers to do this.. they can cash out.

    its a HORRIBLE idea for newbies and those that have little to no money.. they can find themselves in a world of hurt when their buyer default or the renter does what has happened to you and they need to continue making payments and simply don't have the dough to fix them up nor make the payments

    you leave the seller in an extremely bad place.. they then sue and turn folks in to the authorities  ( like you ask me how I know :)  I have rescued more than one novice thinking sub too was nirvana only to find them selves totally fubared.

    its only good for very short term and for those with money... no begineers with little capital..

     Hi @Jay, "beginners with little capital" aren't buying ANY kind of real estate. ;-) 

    You have a different definition than I have about "Sub To". If I take $25,000 and buy a $200,000 house "Sub To" for the $100 down (as I did recently) and take over their payment of about $1,000 a month, and then sell it for $25,000 down and $1750 a month and net $750 a month (as I did on this house in Mesa) on a 30 year term how exactly is that risky? I still have a substantial reserve to make the payment in case I don't get one from my buyer. It is done through escrow with a Title report and plenty of reserves. Not sure what your example is but that is how it SHOULD be done. That is how I teach it and that is all I've done for about twenty years in 3 different major markets. Very successfully, I might add. ;-)

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    @Account Closed  I understand you probably sell a how too course on sub too.. and I have done hundreds of them myself.  what happens on BP is you get people with 1k in their pocket read your post and off they go.. and they get all screwed up becasue they simply don't have the reserves to handle the default situations and since your dealing in sub prime paper  ( non traditional interest rates and financing) your going to have defaults... 

    and you may have reserves today what happens if you blow your reserves then have one go upside down.

    And how is it a good idea for your seller to keep a loan in their name for 30 years.. this many times keeps them from getting another loan.. they don't ( your seller) realize what a mistake it was until they try to go get more credit.

    there is a place for this usually in quick flips.. long term at least for any seller that would talk to me its very dangerous for them. and it is not a beginners play.. which is what those who sell HOW TO play to that audiance.. unless your saying your not in the education business and just teach people for free.

    so we can agree to disagree on the merits of this scheme for ALL parties not just YOU... 

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  • Dana WhickerPro Member
    Investor · Fernandina Beach, FL · Member since 2014 · 557 posts · 374 votes
    9y

    If you want money without working for it you could try the lottery.

    I don't tell people I'm a REI these days. They think it's all Chip and Joanna. Well it's not. It's a lot of hard work and it's a long game. So it's a lot of hard work for a long time. But the payoff is very good if you play the game right.

    You have to get very good at the numbers. Know your market(s) as well or better than your favorite agent(s). Build relationships. Then when you see a deal, you jump all over it. By the way, these days the only reason that deal was there was there's probably a problem to solve. Get good at solving problems. By the way, does that sound passive?

    Then again maybe I just don't know the secret.

    5Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    @Adam Acord  I totally agree with you some of my clients who have done the best in rental game own their assets free and clear... I get the leverage up model.. but free and clear is a nice place to be for long term.

    thats where I am headed personally these days... 

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  • David Faulkner
    Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
    9y
    Originally posted by @Steve Vaughan:

    I think you are missing leverage.  Buying for cash free and clear would take a looong time to see returns.  A cap of 6 would take over 15 years.

    I did your example in 2003, but it was x10. I bought a 10-unit for $250k with $25k down. Bank REO. He wanted $50k down (most all commercial is 20% down at least) so he took a 3rd mortgage on a house I had 3 states away in CO.

    Anyway, if you use intelligent leverage (borrow at good rates and terms) you will see there is cash-flow.  The other advantages like appreciation, principle pay-off and tax benefits will come into play over time.

    @Jesse Flores - answer me this.  If a person you trusted offered you $100 today or $500 in 5 years, which would you choose?  Leave out risk of non-payment.  That will tell us a lot of what kind of investor you are.  

    A $100 now guy needs to  be an operator - a wholesaler or flipper.  One who waits would be an investor.  Cheers!

    Yes, leverage can be a wonderful or horrible thing, depending on if it is working for or against you. In the hands of a skilled RE operator it is normally a wonderful thing ... since folks asked the dynamics of how it can be done, I will share my personal strategy, though there are many different ways ... I believe that leverage is important early on to grow your portfolio at an accelerated pace, but becomes less important and can even be detrimental later on when you've already built out your portfolio and start to value capital preservation over capital growth. So, my plan has always been to leverage up to grow my portfolio to the point that I control enough assets that if they were all free and clear I could live off the cash flow (with margin). Once I hit that point (but not before), rather than leveraging and pouring all my cash flow and savings into growing my portfolio, I "flip the switch" and channel it all to rapidly paying off the mortgages ... then once they are free and clear, I'm done. And since I buy in quality neighborhoods with a long history of strong demand, limited supply, and therefore rent increases, my cash flow per unit tends to go something like $100/mo first year, $200/mo second year, $320/mo third year, $450/mo forth year ... as opposed to being cheap and buying in less desirable neighborhoods where the cash flow goes $300/mo first year, $300/mo second year, $300/mo third year ... you are actually losing purchasing power in this case after factoring inflation. And yes, this plan can take a decade or more ... if you want get rich quick, don't go into RE, but warning that get rich quick usually results in get broke quick because the risk you take on not being coupled with investment skills to mitigate them. Compounding of knowledge and investment skills is every bit as important in this process as compounding of money, and it does take time ...

    4Reply
  • Lee S.
    Northern, CA · Member since 2014 · 674 posts · 444 votes
    9y

    I love the "I want to get rich quick without any work" mindset.  Good luck.  My plan is same as above, use safe leverage to acquire enough properties then flip the switch and pay them all down and be done.  I don't consider properties that I will have to rent to "low end" tenants, no thanks, rather flip those.

    If an investor went full tilt for a few years it's very possible to get to 10-20k monthly cash flow.  I'm personally pushing forward as fast as I can find a DEAL, doesn't do me any good to buy something just because.  

    2Reply
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